- Dividends cut to new base levels
- Oil demand is likely to slow in the next decade
The future of oil and gas became clearer in 2020. As most supermajors stressed about plunging oil prices, managing debt and transforming their businesses into something palatable to environmentally-minded investors, Saudi Aramco (Sa:2222) chose to pay its $75bn (£56bn) dividend by adding debt and taking the hit to free cash flow.
BP (BP.) and Royal Dutch Shell (RDSB) acted more aggressively than other Covid-19-hit companies, cutting dividends to new base levels, so there will be no make-up payouts once conditions stabilise. BP shareholders could be waiting some time for buybacks to come from growing cash flow, given management has said net debt needs to be under $35bn for this to happen. RBC Capital Markets forecasts that this will take another three years.